Main Street Money Trail Shows Caution and Rocky Timing

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According to Lipper, stock mutual fund net inflows by individual investors in 2012 increased in October in comparison to September:

June to July also showed increased net inflows into stock mutual funds. In both cases, it appeared that investors began moving money out of money market funds (a “safe haven” for savers) and into higher-returning assets.

August to September, however, showed net stock mutual fund outflows:

It coincided with the end of a bull run (highlighted in yellow below) that started in late June 2012, after positive Eurozone bailout news hit the wires. And it coincided with the end of the 2012 election season.

Investors appeared to invest in stock mutual funds after seeing Eurozone certainty in June 2012, then took profits in August. Investors then got back in before November–right before the 2-4% dip that happens after an incumbent is re-elected.

November inflow/outflow numbers will be telling.  Experienced investment advice – for example, from a fee only investment advisor like Price Capital – may have guided investors during November to take advantage of the dip. This guidance is backed by our founder’s 2012 market forecast based on history.

A 2-4% decline occurred in past stock markets after an incumbent was re-elected.  History also shows that the December after an incumbent is re-elected is usually one of the best trading months of the year.

Having advice during this rocky time may help.  However, please keep in mind that the past is not a guarantee of future performance.

If the inflow/outflow numbers show money moving back into money market funds in November and December, it may be safe to assume that caution and rocky timing still prevail.